Drawing the future of Europe's skies

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Predictions for the aviation industry are very positive. Various market outlooks, including Boeing’s, predicts that airline fleets, traffic and overall commercial aircraft market is set to only grow in the next 20 years. In total, Boeing predicts that airlines will require 44,040 new aircraft deliveries. Almost 9 thousand of those will be in Europe, a region where it seems that low-cost carriers and legacy airlines are engaged in a price war of attrition to win over passengers. The region is a special case, as Drew Magill, the managing marketing director for Europe at Boeing, spoke at AIR Convention and highlighted that in Europe "yields have decreased by 35% in the last 10 years, travel costs have gone down 35%, while at the same time airport pairs have increased by 30%", thus there is more connectivity for a third of the price. While Asia-Pacific will drive future growth, Europe "has been leading" the industry for the past year", added Magill.

Out of the 8,990 new aircraft deliveries in Europe, 7,260 of those will be narrow-bodies, according to the U.S. based manufacturer. And it's not hard to see why – no-frills carriers like Ryanair, easyJet and Wizz Air are pressuring the “old” airlines like Air France, British Airways, KLM, Lufthansa and many others. Yet the bickering between the two sides has created a problem on the continent.

Lowest price wins

One of the most relevant topics about Europe‘s aviation industry is the on-going price war between the Lufthansa group and low-cost carriers, mainly Ryanair and easyJet. The feud, which sparked harsh comments from Lufthansa‘s CEO and a cheeky dig back from Ryanair, is entertaining to watch for now. Yet at the same time, as Lufthansa tries to employ a damage-control strategy and reorganize its subsidiaries, including the low-cost Eurowings, the German airline group is bleeding market share in its own home market, Germany. Slowly, but surely, low-cost carriers are chipping away the difference in how many passengers depart from the country on mainline airlines‘ seats, according to Routesonline data. In 2014, the difference was 80.8 million departing seats. Just four years later, the difference is 47 million seats.

Elsewhere in Europe, the market is saturated with battles between legacy and low-cost carriers as well. In the United Kingdom, British Airways has to fend off several low-cost carriers, including long-haul competition from Norwegian and Virgin. In 2017, out of the top five airlines by market share, British Airways was the second airline by passenger numbers behind easyJet. The low-cost carrier transferred almost twice as many passengers as BA. The following year, the flag carrier consolidated further, because both easyJet and Jet2 increased their traffic numbers by 10 and 3 million, respectively. And this is without including Ryanair – the Ireland-registered accounted for 19% of the market in the UK, according to its FY19 financial report.

Back in May, Air France already planned to axe 400+ jobs as it tries to reduce its losses and consolidates domestic market share to low-cost carriers, which have “gained ground through aggressive pricing policies”, as noted by the airline. In Spain, the top two airlines splitting the market are low-cost carriers, namely Ryanair and Vueling. And Western Europe is not the only region where mainline carriers are struggling. Heading East, Ukraine International Airlines is $100 million in the red, as its losses increase further due to fierce competition from both Ryanair and mainly, Wizz Air. The purple low-cost carrier announced seven additional routes in August 2019 from Ukraine, further pressuring the flag carrier of the country. Nordica, after hanging on by a thread, seems more than likely to exit its home base, Tallinn, and only operate flights without assuming commercial risk, as again, the competition finished off the Estonian airline – airBaltic and Wizz Air are mostly to “blame” for the consolidation of Nordica.